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The fuse has been lit

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(Kitco News) - Last week I described gold as a horse that wouldn't run, but now the market has definitely found its legs as prices are ending the week near a 10-week high well above $1,800 an ounce.

A lot has changed in financial markets as we head into the weekend, and we are not just talking about Friday's extremely disappointing nonfarm payrolls report. The fuse was lit Thursday as gold prices made their move above $1,800.

The most significant shift in the marketplace has been the fact that consumers, investors, and businesses are taking the growing inflation threat more seriously. If you need proof of the looming economic hazard, you just have to take a look at commodities like copper and lumber. Copper prices continue to rally from record to record as the market faces a significant supply crunch due to growing demand and falling supply.

Copper's rally is not expected to end anytime soon. Bank of America made headlines this week when it said that it sees copper prices pushing to $13,000 a tonne. Not only does the copper market face a major supply issue this year, but the bank said that the deficit could double next year.

Rising inflation, as the U.S. economy sees robust economic growth, has also been putting pressure on the Federal Reserve and there were growing expectations that they might have to tighten its ultra-accommodative policies sooner than expected.

Tuesday, Treasury Secretary Janet Yellen spooked financial markets, including gold, when she stepped outside her lane and said that interest rates might have to rise to stop the economy from overheating.

She later walked back those comments, which helped to alleviate some of the mess she created, but she really just said what a lot of economists have been thinking as the U.S. economy continues to recover from the COVID-19 pandemic.

And now throw into the mix the extremely disappointing nonfarm payrolls data, which showed 266,000 jobs were created in April. According to reports, this is the second biggest miss in the report's history. To put this into perspective, some economists' estimates were expecting to see more than 2 million jobs created.

The latest employment report has thrown a massive bucket of cold water on any tapering expectation, at least for the next couple of months. The latest employment numbers give the Federal Reserve a little bit more breathing room, and it is creating the perfect environment for gold.

Rising inflation and low interest rates mean that real interest rates are going to remain deeply in negative territory for the foreseeable future. Even the bond market is starting to recognize this new reality as we start to see yields decline again.

So, with gold on the run, now is the time to see just how far it can go. Some analysts noted that while gold's push above $1,800 has repaired a lot of damage in the marketplace, there is still some more work to do. In particular, some analysts are anxious to see if prices can get back above their 200-day moving average.

That is it for this week. Have a great weekend.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.